Modern Households: Domestic Partners & Same-Sex Couples

Marriage equality can raise new financial questions for same-sex couples and domestic partners.

The proportion of U.S. same-sex cohabiting couples getting married increased from 38 to 49 percent since the Supreme Court ruling legalized such unions nationwide, according to Gallup research. However, new research from the NAIC suggests many couples may be sidestepping some important insurance questions on the way to the altar. Not getting smart about insurance before tying the knot could be costly. The new ruling also may require domestic partners not contemplating marriage to revisit current coverage.

In an online survey, the NAIC asked recently or soon-to-be married LGBTQ individuals to share their views about financial factors they consider important to address before marriage.

Eighty two percent said they discussed or planned to discuss health insurance before walking down the aisle. Life insurance and taxes tied for the second most likely pre-marriage financial topics at 70 percent.

Women in same-sex relationships are significantly more likely than men to discuss life insurance pre-marriage (74 vs. 61 percent).

By contrast, less than one-quarter of respondents inquired or planned to inquire about their partner’s driving record before saying “I do.”

Twenty-five percent view the impact of commingling assets as their single greatest pre-marriage financial consideration.

Married respondents who earn between $50,000 and $75,000 per year are more likely to cite taxes as the single greatest financial consideration before marriage (34 percent) than married respondents who make less than $25,000 (16 percent) or those making more than $75,000 (18 percent).

The NAIC encourages LGBTQ individuals in a committed relationship, newly married same-sex couples and domestic partners to educate themselves about the impact of the Supreme Court’s marriage equality ruling on all insurance types: health, life, auto and home.

Note that while marriage equality ensures legally-married same-sex couples have access to insurance options equivalent to heterosexual married couples, state and local laws continue to govern most issues regarding the recognition, rights, benefits and privileges associated with domestic partnerships. Contact your state insurance commissioner for more tips to help same-sex couples and domestic partners make the right insurance decisions, including information specific to where you live. And find out more about how life events such as getting married or becoming a new parent can affect insurance needs.

Most insurance companies offer multi-car/multi-driver discounts to married couples and domestic partners in long-term, committed relationships. Combining policies might make sense unless your partner has a less than stellar driving record. Check with your auto insurer to see if you’re eligible for such offerings, but take the time to ask your partner the tough questions before making any changes.

If you choose not to marry, and you and your partner either share a car or drive one another’s cars, consider listing each other as secondary drivers on both auto insurance policies. Such disclosure will eliminate uncertainty and may prevent a claim being denied in the event of an accident.

While most insurance companies require nothing more than notification that both legally married spouses plan to drive a rented car, domestic partners may need to pay extra to share driving responsibilities. Check with the car rental company to make sure you understand additional driver rules.

Home Insurance Considerations for Domestic Partners and Same-Sex Couples

Whether you choose to marry or not, if you and your significant other buy a home together, make sure both names are listed on the deed, mortgage and homeowner’s policy.

If you are not married and living in a home owned by only one partner, consider having the homeowner’s policy endorsed to include coverage for the non-homeowner’s belongings. This approach may be less expensive than purchasing a separate renter’s policy.

Under the Affordable Care Act, all insurance companies must offer the same individual or group health plans to legally-married gay and lesbian couples as those offered to married heterosexual couples. For many employers, this ruling calls into question the need to maintain domestic partner benefits. Such a change may require same-sex couples with no plans to marry to seek other options.

Federal or state laws do not limit employers or insurance companies from recognizing domestic partners. However, some employers and insurance providers may require formal proof of your relationship and any dependent children. Documentation may include a domestic partnership affidavit, birth certificates or copy of a lease, homeowners’ insurance policy or joint financial account statement.

To make sure your significant other and his or her children are eligible for company-sponsored domestic partner benefits, check with your Human Resources representative to understand exactly how your employer defines key terms such as “domestic partner,” “family member,” and “dependent.” You may want to contact your employer’s health insurance company directly before enrolling in coverage.

Unlike reimbursements to legally married couples, employer-provided domestic partner health insurance benefits are not exempt from federal taxes, and state tax exemptions vary. Additionally, pre-tax dollars from flexible spending or health savings accounts cannot be used to cover domestic partner benefits. As a result, these benefits are counted as income to the employee.

Domestic partners may want to consult an attorney to create a healthcare proxy or power of attorney document. This document, not required for legally married spouses, allows for hospital visitation and authorizes your partner to make medical decisions if you are unable to do so.

If your marriage or domestic relationship dissolves and you are receiving benefits from your partner’s employer-sponsored group health plan, you may be entitled to continue your coverage for up to 18 months under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). Check with your state insurance department for COBRA laws in your state.

Life Insurance Considerations for Domestic Partners and Same-Sex Couples

Be sure to list your partner as beneficiary on all individual and company-sponsored life insurance policies. While the marriage equality ruling renders this a non-issue for married same-sex couples, in the absence of a will, state laws that do not recognize domestic partnerships may not recognize a non-married partner as a legal heir.

Depending on the domestic partner insurance laws in your state, as well as state and federal tax implications, it may make sense to hold your life insurance policy in a trust and name the trust as beneficiary. Before enrolling in coverage, consult an attorney, tax or financial advisor familiar with your state laws.

By getting married, same-sex partners in marriage and business may be able to simplify life insurance policies, removing contingencies such as interlocking plans that protect against exorbitant estate taxes when one partner dies. If you haven’t read your life insurance policy recently (or ever), now is good time.

Whether you choose to marry or not, don't designate a minor child as a direct life insurance beneficiary. Instead, name a contingent beneficiary or trustee to act as beneficiary on behalf of the child. Otherwise, the life insurance benefit may not be accessible to the child until your estate is processed through the courts.